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Telomeres are heterochromatic structures at chromosome ends essential for chromosomal stability. Telomere shortening and the accumulation of dysfunctional telomeres are associated with organismal aging. Using telomerase-deficient TRF2-overexpressing mice ( K5TRF2 / Terc −/− ) as a model for accelerated aging, we show that telomere shortening is paralleled by a gradual deregulation of the mammalian transcriptome leading to cumulative changes in a defined set of genes, including up-regulation of the mTOR and Akt survival pathways and down-regulation of cell cycle and DNA repair pathways. Increased DNA damage from dysfunctional telomeres leads to reduced deposition of H3K27me3 onto the inactive X chromosome (Xi), impaired association of the Xi with telomeric transcript accumulations (Tacs), and reactivation of an X chromosome-linked K5TRF2 transgene that is subjected to X-chromosome inactivation in female mice with sufficiently long telomeres. Exogenously induced DNA damage also disrupts Xi-Tacs, suggesting DNA damage at the origin of these alterations. Collectively, these findings suggest that critically short telomeres activate a persistent DNA damage response that alters gene expression programs in a nonstochastic manner toward cell cycle arrest and activation of survival pathways, as well as impacts the maintenance of epigenetic memory and nuclear organization, thereby contributing to organismal aging.